The Las Vegas real estate market has been making headlines during the coronavirus pandemic. But it’s not for the reasons you might expect. Rather than making headlines for a bursting housing bubble or a full-blown housing market crash (as many predicted would happen this year), everyone has been talking about how hot the Las Vegas real estate market 2020 has been. Demand is high, inventory is low, and home prices are soaring.
According to Realtor.com’s Housing Market Recovery Index, the Las Vegas metro area officially crossed the threshold for recovery back in June, after taking a hit from COVID-19 earlier in the year. As of the beginning of October, the index has dropped somewhat but sits at 121.5.
While many real estate markets across the US are experiencing a kind of boom despite COVID-19 (like the Seattle housing market), these trends are quite unexpected for Las Vegas. That’s because the city’s economy, which relied greatly on the tourism industry, was hit pretty hard by the pandemic. In August, the Las Vegas metro area recorded an unemployment rate of 15.5%. While the nation as a whole experienced high rates during the first wave of the coronavirus, the latest numbers show a somewhat improving situation, with a national unemployment rate of 7.9% in September 2020.
What impact will this kind of imbalance between the economy and the real estate market have on the industry in 2021? Will the boom continue or will the housing market go down in Las Vegas? According to the general forecast by multiple experts in the industry, here are the 6 Las Vegas real estate market trends we can expect in 2021.
#1. Las Vegas Housing Inventory May Get a Boost in 2021
Let’s take a step back before getting into the first of our Las Vegas housing market predictions. Why is housing booming right now, amid a health and economic crisis? It boils down to a few things, one major factor being very low housing inventory.
Las Vegas Realtors reported that, at the beginning of September, there were less than 4,700 homes for sale on the market. Although that number ticked up by the end of the month to 4,798, the inventory was still down year over year (YoY) by double digits – 34.6%.
Who is buying up Las Vegas homes for sale? Across the US, millennials and first-time homebuyers are entering the market to take advantage of low mortgage rates. While this is true for the Las Vegas real estate market, there is another set of buyers in the city – internal migrants. During COVID-19, Las Vegas has seen a high influx of people coming from more expensive regions like the New York, Hawaii, and California housing markets. Las Vegas has more of a “suburban feel” and is relatively affordable compared to these areas, hence the migration trends.
So why is the Las Vegas real estate market trend of rising inventory expected for 2021? It comes down to the current mortgage forbearance in place and unemployment rates. Expected to expire by 2021, the federal mortgage forbearance is protecting homeowners who are struggling with unemployment during COVID-19. Because the unemployment rate is so high in Las Vegas, this could mean a large number of distressed real estate listings, flooding the market at discounted rates next year.
#2. Housing Prices May Drop in the Las Vegas Real Estate Market
Right now, Las Vegas housing prices are soaring. Las Vegas Realtors reported that in September, the median sales prices of existing single-family homes reached $337,250, up 8.8% YoY. In fact, this Las Vegas real estate market trend of rising prices was witnessed in March, June, July, and August of this year. And Zillow reports that home values in the Las Vegas real estate market have gone up 3.8% over the last year.
Because these house price trends do not match the current economic climate in Las Vegas, which continues to struggle, this price growth is not sustainable. So it’s very likely that home prices will drop in the Las Vegas real estate market 2021.
This Las Vegas real estate market forecast comes from CoreLogic. In its Home Price Insights Report, the Las Vegas metro area was second on the list of “Top Markets at Risk of Home Price Decline.” Corelogic predicts that prices will fall in the area by 6.5% by August 2021.
#3. There Could Be a Shift Away From a Hot Seller’s Market
Based on the last two Las Vegas housing market predictions for 2021, it’s possible that the city may go through a market shift – from a very hot seller’s market, closer to a buyer’s market. After all, a buyer’s market is characterized by both rising inventory and dropping prices.
However, it’s important to keep in mind one factor and that is demand. If demand remains high in the Las Vegas real estate market 2021, a small boost in inventory from distressed properties may not be enough to match it. And with the mortgage rate forecast showing rates dropping as low as 2.9% next year, demand will remain high.
So it’s more likely that the Las Vegas real estate market will undergo a very slight cooling where buyers will have more choices in homes for sale and find bargains in distressed homes. 2021 may resemble more of a balanced market than a full-blown buyer’s market.
#4. The Las Vegas Housing Market Will Not Crash in 2021
As of now, there are no clear signs of a housing market crash happening in the 2021 Las Vegas real estate market.
A Las Vegas real estate market forecast 2021 with a rise in inventory and dropping home prices means a housing market crash is in the city’s future, right? Actually, that is not the case at all. The Chief Economist at CoreLogic, Frank Nothaft, commented on this. Despite the fact that CoreLogic is confident that home prices will drop in Las Vegas by 2021, Nothaft says that real estate investors and homeowners shouldn’t expect the situation to get anywhere near as bad as it did during the 2008 housing market crash:
I expect price declines to be temporary. They will turn around and start to rise gradually after that.
And remember, the price decline will be comparatively small (6.5%) to what we witnessed on the national level in 2008 – a drop of around 33%. Additionally, the boost in inventory is also not expected to be high enough to cause a crash.
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#5. Las Vegas Will Still Be a Good Rental Market Next Year
Besides the prospect of a housing market crash, you might also be wondering “Is Las Vegas a good rental market?” Again, with talk of dropping prices, some panic and think they need to avoid such a market. However, a real estate investor who plans on buying and holding a Las Vegas investment property and renting it out for positive cash flow shouldn’t worry about a slight, temporary decline in prices.
Right now, Las Vegas real estate investors are enjoying high rental income and good returns, according to Mashvisor’s data:
- Traditional Rental Income: $1,315
- Traditional Cash on Cash Return: 2.3%
Besides those return on investment statistics for the average Las Vegas rental property, more inventory, motivated sellers, and a decline in prices is a great environment to snatch up real estate deals. The 2021 Las Vegas real estate market will be a great place to invest in real estate, based on these trends.
The only advice here would be to keep an eye on the unemployment rate. Generally, investors should choose a real estate market with a low unemployment rate. If 2021 brings with it a COVID-19 vaccine and the hospitality industry is able to return to normal, hopefully, unemployment rates will recover.
#6. These Are the Best Neighborhoods in Las Vegas for 2021
So where should you buy a Las Vegas rental property in this vast residential real estate market? Our next Las Vegas housing market prediction points to 10 of the best neighborhoods in Las Vegas for real estate investing. The following neighborhoods made this list because they currently provide investors with good cash on cash return and are forecast to do so in 2021.
#1. Winchester
- Median Property Price: $275,177
- Price per Square Foot: $161
- Price to Rent Ratio: 23
- Traditional Rental Income: $1,007
- Traditional Cash on Cash Return: 2.8%
#2. North Cheyenne
- Median Property Price: $364,531
- Price per Square Foot: $193
- Price to Rent Ratio: 24
- Traditional Rental Income: $1,243
- Traditional Cash on Cash Return: 2.7%
#3. Downtown East
- Median Property Price: $241,638
- Price per Square Foot: $165
- Price to Rent Ratio: 19
- Traditional Rental Income: $1,052
- Traditional Cash on Cash Return: 2.7%
#4. Cultural Corridor
- Median Property Price: $236,233
- Price per Square Foot: $158
- Price to Rent Ratio: 20
- Traditional Rental Income: $968
- Traditional Cash on Cash Return: 2.6%
#5. Buffalo
- Median Property Price: $408,724
- Price per Square Foot: $186
- Price to Rent Ratio: 28
- Traditional Rental Income: $1,214
- Traditional Cash on Cash Return: 2.5%
#6. Sunrise
- Median Property Price: $234,438
- Price per Square Foot: $161
- Price to Rent Ratio: 23
- Traditional Rental Income: $837
- Traditional Cash on Cash Return: 2.5%
#7. Huntridge
- Median Property Price: $288,126
- Price per Square Foot: $184
- Price to Rent Ratio: 24
- Traditional Rental Income: $1,011
- Traditional Cash on Cash Return: 2.4%
#8. Sunrise Manor
- Median Property Price: $254,927
- Price per Square Foot: $161
- Price to Rent Ratio: 25
- Traditional Rental Income: $851
- Traditional Cash on Cash Return: 2.3%
#9. Rancho Charleston
- Median Property Price: $387,426
- Price per Square Foot: $182
- Price to Rent Ratio: 26
- Traditional Rental Income: $1,246
- Traditional Cash on Cash Return: 2.3%
#10. East Las Vegas
- Median Property Price: $225,663
- Price per Square Foot: $155
- Price to Rent Ratio: 25
- Traditional Rental Income: $758
- Traditional Cash on Cash Return: 2.2%
Ready to Start Investing in Las Vegas Real Estate?
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